The Globe and Mail, Richard Blackwell, 15 January 2008
Toronto-Dominion Bank chief executive officer Ed Clark says he likely won't consider more acquisitions in the United States because the potential targets would take so much money to fix.
Any banks that are coming available south of the border require a tremendous amount of new capital, he told a banking conference in Toronto Tuesday.
To buy a struggling U.S. bank "you have to have double money," Mr. Clark said. "You've got to be in a position where you can acquire, but you also have … to recapitalize what you just acquired.
"Frankly we're not in that position [since] we don't have a lot of surplus capital," he said. "I don't see us swooping in and buying something."
Last fall, TD agreed to buy Commerce Bancorp Inc. of Cherry Hill, N.J., for $8.5-billion (U.S.). That deal, which would make TD a North American powerhouse, has not yet closed.
One reason there have not been more purchases of U.S. financial institutions is that many potential acquirers "are on their knees or are out in Asia looking for money," Mr. Clark said.
Several U.S. banks, and Canadian Imperial Bank of Commerce, have looked East for recapitalization after taking a hit in the subprime mortgage market.
Mr. Clark made several references to the fact that TD, unlike other banks, has not had to take writedowns related to the subprime market.
He said TD avoided some of the riskiest businesses, such as selling credit derivatives or other structured products, because he realized "they were cruising for a bruising."
TD still takes risks, Mr. Clark insisted, but these are directly related to the way it executes its operations. "We do take transparent, understandable risks."
One spinoff of the "meltdown" among the other big banks is that they will "shift their strategies to be more like us," he said, with an increased emphasis on high-service retail banking.
Over all, Mr. Clark said, TD will be affected by the pain other banks are suffering in the current financial services crisis, even if it is not feeling any direct impact.
"You may not be on the train, but if you're standing at the station watching the train go by and it has a train wreck, you'll still get hurt."
In the United States in particular, Commerce Bancorp and Banknorth Group Inc., which TD bought in 2005 and renamed TD Banknorth Inc., will certainly be hit if the banking crisis evolves into a general economic downturn, he said. Still, TD will endure less pain than many other banks because they have been run very conservatively.
"If this financial crisis turns into a general U.S. heavy slowdown, both of those entities have to be affected, but they will be positive outliers," Mr. Clark said.
Toronto-Dominion Bank chief executive officer Ed Clark says he likely won't consider more acquisitions in the United States because the potential targets would take so much money to fix.
Any banks that are coming available south of the border require a tremendous amount of new capital, he told a banking conference in Toronto Tuesday.
To buy a struggling U.S. bank "you have to have double money," Mr. Clark said. "You've got to be in a position where you can acquire, but you also have … to recapitalize what you just acquired.
"Frankly we're not in that position [since] we don't have a lot of surplus capital," he said. "I don't see us swooping in and buying something."
Last fall, TD agreed to buy Commerce Bancorp Inc. of Cherry Hill, N.J., for $8.5-billion (U.S.). That deal, which would make TD a North American powerhouse, has not yet closed.
One reason there have not been more purchases of U.S. financial institutions is that many potential acquirers "are on their knees or are out in Asia looking for money," Mr. Clark said.
Several U.S. banks, and Canadian Imperial Bank of Commerce, have looked East for recapitalization after taking a hit in the subprime mortgage market.
Mr. Clark made several references to the fact that TD, unlike other banks, has not had to take writedowns related to the subprime market.
He said TD avoided some of the riskiest businesses, such as selling credit derivatives or other structured products, because he realized "they were cruising for a bruising."
TD still takes risks, Mr. Clark insisted, but these are directly related to the way it executes its operations. "We do take transparent, understandable risks."
One spinoff of the "meltdown" among the other big banks is that they will "shift their strategies to be more like us," he said, with an increased emphasis on high-service retail banking.
Over all, Mr. Clark said, TD will be affected by the pain other banks are suffering in the current financial services crisis, even if it is not feeling any direct impact.
"You may not be on the train, but if you're standing at the station watching the train go by and it has a train wreck, you'll still get hurt."
In the United States in particular, Commerce Bancorp and Banknorth Group Inc., which TD bought in 2005 and renamed TD Banknorth Inc., will certainly be hit if the banking crisis evolves into a general economic downturn, he said. Still, TD will endure less pain than many other banks because they have been run very conservatively.
"If this financial crisis turns into a general U.S. heavy slowdown, both of those entities have to be affected, but they will be positive outliers," Mr. Clark said.
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Reuters, 15 January 2008
The top executives of Bank of Nova Scotia and Royal Bank of Canada said on Tuesday that they are financially well placed to make acquisitions, but unlikely to seek big deals just because global bank stocks have come under pressure.
Royal Bank, the largest in Canada, is in the process of closing purchases of RBTT Financial Group in the Caribbean and Alabama National BanCorp in the U.S. Southeast.
"We feel we're in a position to continue to look at acquisitions," Royal Bank Chief Executive Gordon Nixon told a conference in Toronto.
"On the banking side of the equation, both in the United States and the Caribbean, I wouldn't look for us to be deploying capital in those areas in the short term, given that we've got two acquisitions in process," Nixon said.
Royal will stay "disciplined" as it keeps looking at possible deals, and would be more likely to make wealth-management acquisitions than another bank purchase, he added.
"We do have an environment where unexpected opportunities may present themselves ... but we're not going to chase transactions for the sake of doing deals, simply because values have come down," Nixon said, pointing out that Canadian bank stock valuations have fallen too, as the global industry has been pummeled by the credit crisis.
As for Bank of Nova Scotia , President and CEO Rick Waugh told the same RBC Capital Markets conference that his bank's strategy is consistent, so he does not foresee any "transformational" acquisitions.
In 2007, Scotiabank bought Banco del Disarrollo in Chile, 25 percent of a Thai bank, and 10 percent of First BanCorp in Puerto Rico, among other deals.
Outside Canada, Scotiabank tends to start with small ownership stakes in financial companies, and gradually increases its holdings.
"The pipeline is always good," Waugh said. "Capital is not a constraint (to future acquisitions)."
About 31 percent of Scotiabank's $4 billion profit in 2007 came from its international banking segment, which operates in Mexico and dozens of other countries in the Caribbean and Central America, South America and Asia.
Domestically, Canada's third-largest bank has taken steps to beef up its lagging wealth management business. It bought an 18 percent stake in Toronto-based money management firm DundeeWealth Inc last year.
Since the September purchase, which Waugh said equated to about $13 per DundeeWealth share, DundeeWealth stock zoomed up to more than $23, then fell back below $17, on changing speculation about whether controlling shareholder Ned Goodman would accept takeover offers.
Scotiabank has the right to match any offer to buy DundeeWealth. Mutual fund firm CI Financial Income Fund expressed interest in late 2007, and holding company Power Financial Corp and Manulife Financial Corp , Canada's largest insurer, were also rumored to be suitors.
"Of course we have the opportunity to increase our exposure when and if Ned Goodman decides to do something, but in the meantime we're in a very nice position," Waugh said.
The top executives of Bank of Nova Scotia and Royal Bank of Canada said on Tuesday that they are financially well placed to make acquisitions, but unlikely to seek big deals just because global bank stocks have come under pressure.
Royal Bank, the largest in Canada, is in the process of closing purchases of RBTT Financial Group in the Caribbean and Alabama National BanCorp in the U.S. Southeast.
"We feel we're in a position to continue to look at acquisitions," Royal Bank Chief Executive Gordon Nixon told a conference in Toronto.
"On the banking side of the equation, both in the United States and the Caribbean, I wouldn't look for us to be deploying capital in those areas in the short term, given that we've got two acquisitions in process," Nixon said.
Royal will stay "disciplined" as it keeps looking at possible deals, and would be more likely to make wealth-management acquisitions than another bank purchase, he added.
"We do have an environment where unexpected opportunities may present themselves ... but we're not going to chase transactions for the sake of doing deals, simply because values have come down," Nixon said, pointing out that Canadian bank stock valuations have fallen too, as the global industry has been pummeled by the credit crisis.
As for Bank of Nova Scotia , President and CEO Rick Waugh told the same RBC Capital Markets conference that his bank's strategy is consistent, so he does not foresee any "transformational" acquisitions.
In 2007, Scotiabank bought Banco del Disarrollo in Chile, 25 percent of a Thai bank, and 10 percent of First BanCorp in Puerto Rico, among other deals.
Outside Canada, Scotiabank tends to start with small ownership stakes in financial companies, and gradually increases its holdings.
"The pipeline is always good," Waugh said. "Capital is not a constraint (to future acquisitions)."
About 31 percent of Scotiabank's $4 billion profit in 2007 came from its international banking segment, which operates in Mexico and dozens of other countries in the Caribbean and Central America, South America and Asia.
Domestically, Canada's third-largest bank has taken steps to beef up its lagging wealth management business. It bought an 18 percent stake in Toronto-based money management firm DundeeWealth Inc last year.
Since the September purchase, which Waugh said equated to about $13 per DundeeWealth share, DundeeWealth stock zoomed up to more than $23, then fell back below $17, on changing speculation about whether controlling shareholder Ned Goodman would accept takeover offers.
Scotiabank has the right to match any offer to buy DundeeWealth. Mutual fund firm CI Financial Income Fund expressed interest in late 2007, and holding company Power Financial Corp and Manulife Financial Corp , Canada's largest insurer, were also rumored to be suitors.
"Of course we have the opportunity to increase our exposure when and if Ned Goodman decides to do something, but in the meantime we're in a very nice position," Waugh said.
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Reuters, 15 January 2008
A recession in the United States poses the main risk to Toronto-Dominion Bank's U.S. earnings, not the credit portfolio of a pending acquisition, the bank's chief executive said on Tuesday.
"We can't outrun a U.S. recession," TD Bank President and CEO Ed Clark told a conference in Toronto.
"We are what we are; we can't outrun a Canadian recession," he added.
But Clark said TD's U.S. banking operations -- which will soon consist of New Jersey-based Commerce Bancorp Inc as well as New England-focused TD Banknorth -- should outperform its peers in such a scenario.
TD is working to complete its pending $7.6 billion stock-and-cash acquisition of Commerce Bancorp. Commerce shareholders will vote February 6 on the proposed takeover.
Once the transaction closes, the Canadian bank will decide whether to keep or sell a $4 billion portfolio of Alt-A mortgages it will inherit from Commerce.
"It's a portfolio we can dispose of -- it's not like it's a no-bid world out there," Clark said.
Alt-A loans fall between subprime mortgages and those with prime status, because applicants either lacked some documentation or had high loans relative to their home value.
"We will not hold that portfolio unless we're absolutely confident we're going to get more money back than it would be to get rid of the portfolio," Clark said.
Any mark-to-market adjustment in the portfolio value would not affect the bank's capital structure in a big way, and would not pose any earnings risk, Clark said.
Last week, TD had to fend off market rumors about a possible multibillion-dollar write-down, forcing the retail-focused bank to point out again that it had stayed away from U.S. subprime mortgage investments.
TD is effectively trying to complete a three-way merger between Cherry Hill, N.J.-based Commerce and Portland, Maine-based TD Banknorth. TD Bank swallowed the latter last year when it bought out minority shareholders.
Banknorth gave the Canadian bank a U.S. operating platform and expertise in commercial banking, and Clark said he would not have tried to buy Commerce without having Banknorth first.
"I couldn't have afforded it without the economies of scale of putting the two together, and I'm not sure I would want to be taking on the venture of Commerce with none of the operating skills that Banknorth brought," Clark told the conference organized by RBC Capital Markets.
TD is increasing provisions for bad loans at Banknorth, even though an accompanying rise in charges has not materialized, and the bank will continue to be conservative in increasing general reserves, Clark also said.
"One of the interesting dilemmas for everybody in financial services is, it is doom and gloom, and yet you can't actually see it in your numbers," Clark said.
"You keep saying, 'Well, it's got to show up in my numbers because the world is going to hell in a handbasket,' but it isn't showing up ... that's an anomaly that we can't figure out."
A recession in the United States poses the main risk to Toronto-Dominion Bank's U.S. earnings, not the credit portfolio of a pending acquisition, the bank's chief executive said on Tuesday.
"We can't outrun a U.S. recession," TD Bank President and CEO Ed Clark told a conference in Toronto.
"We are what we are; we can't outrun a Canadian recession," he added.
But Clark said TD's U.S. banking operations -- which will soon consist of New Jersey-based Commerce Bancorp Inc as well as New England-focused TD Banknorth -- should outperform its peers in such a scenario.
TD is working to complete its pending $7.6 billion stock-and-cash acquisition of Commerce Bancorp. Commerce shareholders will vote February 6 on the proposed takeover.
Once the transaction closes, the Canadian bank will decide whether to keep or sell a $4 billion portfolio of Alt-A mortgages it will inherit from Commerce.
"It's a portfolio we can dispose of -- it's not like it's a no-bid world out there," Clark said.
Alt-A loans fall between subprime mortgages and those with prime status, because applicants either lacked some documentation or had high loans relative to their home value.
"We will not hold that portfolio unless we're absolutely confident we're going to get more money back than it would be to get rid of the portfolio," Clark said.
Any mark-to-market adjustment in the portfolio value would not affect the bank's capital structure in a big way, and would not pose any earnings risk, Clark said.
Last week, TD had to fend off market rumors about a possible multibillion-dollar write-down, forcing the retail-focused bank to point out again that it had stayed away from U.S. subprime mortgage investments.
TD is effectively trying to complete a three-way merger between Cherry Hill, N.J.-based Commerce and Portland, Maine-based TD Banknorth. TD Bank swallowed the latter last year when it bought out minority shareholders.
Banknorth gave the Canadian bank a U.S. operating platform and expertise in commercial banking, and Clark said he would not have tried to buy Commerce without having Banknorth first.
"I couldn't have afforded it without the economies of scale of putting the two together, and I'm not sure I would want to be taking on the venture of Commerce with none of the operating skills that Banknorth brought," Clark told the conference organized by RBC Capital Markets.
TD is increasing provisions for bad loans at Banknorth, even though an accompanying rise in charges has not materialized, and the bank will continue to be conservative in increasing general reserves, Clark also said.
"One of the interesting dilemmas for everybody in financial services is, it is doom and gloom, and yet you can't actually see it in your numbers," Clark said.
"You keep saying, 'Well, it's got to show up in my numbers because the world is going to hell in a handbasket,' but it isn't showing up ... that's an anomaly that we can't figure out."
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The Globe and Mail, Tara Perkins, 15 January 2008
The equity infusions that some global banks, including Canadian Imperial Bank of Commerce, are receiving are a good thing for the financial system, says the CEO of the Royal Bank of Canada.
“It's very healthy for the financial system — if there are issues — to be recapitalized, rather than for those issues to get worse,” Gord Nixon told a banking conference in Toronto on Tuesday.
“Certainly close to home, I think that's a very good thing for the system because, amongst other things, what it shows is there is a lot of capital support out there for the major financial services companies.”
While banks that are receiving cash injections might become more competitive than they otherwise would have been, those banks are also being forced to exit certain businesses, and that's creating opportunities for RBC, Mr. Nixon said.
Bank of Nova Scotia chief executive Rick Waugh also said he believes the liquidity injections are a positive sign.
“Look what's happening — huge, billions of dollars of sophisticated money finding a home. Good news,” he said at the conference.
The comments come one day after CIBC announced that it is raising $2.75-billion by selling discounted shares to investors as it grapples with a total of more than $3-billion in writedowns related to its exposure to the U.S. subprime mortgage market.
On Tuesday morning, the bank's shares were trading down more than 3 per cent, at $69.86 on the Toronto Stock Exchange.
In a note to clients, Credit Suisse analyst Jim Bantis said that the “capital injection should significantly reduce the uncertainty surrounding CIBC's financial position, [but] we remain concerned that the core operating franchise remains under siege by its competitors.”
Mr. Nixon said that, globally, opportunities have been created by the market turmoil that's hampering many banks.
“We are seeing business that we might not have seen before,” he said.
But Canada's biggest bank isn't salivating over acquisition opportunities, despite the fact that banks are cheaper.
“We do have an environment where unexpected opportunities may present themselves, and we're in a position to take advantage of those, but we're not going to chase transactions for the sake of doing deals simply because values have come down,” Mr. Nixon said. Outside of Canada, he suggested that wealth management deals would be more attractive to RBC right now than buying banks would be. Both would be priorities over any capital markets, or investment banking, opportunities.
But Royal Bank remains committed to its capital markets business, which accounts very roughly for one-quarter of its earnings, Mr. Nixon said.
Investment banking earnings growth will likely slow from recent levels. RBC will be seeking most of its growth this year from consumer banking and wealth management.
But Mr. Nixon said he doesn't expect “doom and gloom” in the capital markets business for the next few years.
“It will shift around, but we certainly aren't expecting it to fall off the cliff,” he said. “And we do think there will be an opportunity simply because of other people exiting certain businesses.”
Mr. Nixon said the financial system and markets are already starting to feel better, and that the liquidity that's been pumped into the system is having an impact. However, the “real world” is not necessarily feeling better, he said.
He believes that what happens in the real world, with respect to economic growth, will be “the real story for 2008.”
His colleague Charles Winograd, head of RBC Capital Markets, said 2008 will be simpler than the past year.
“To quote the rhetoric of an election campaign long ago, it will be the economy stupid,” he said, adding that it will be Main Street, not Wall Street, that's key.
The equity infusions that some global banks, including Canadian Imperial Bank of Commerce, are receiving are a good thing for the financial system, says the CEO of the Royal Bank of Canada.
“It's very healthy for the financial system — if there are issues — to be recapitalized, rather than for those issues to get worse,” Gord Nixon told a banking conference in Toronto on Tuesday.
“Certainly close to home, I think that's a very good thing for the system because, amongst other things, what it shows is there is a lot of capital support out there for the major financial services companies.”
While banks that are receiving cash injections might become more competitive than they otherwise would have been, those banks are also being forced to exit certain businesses, and that's creating opportunities for RBC, Mr. Nixon said.
Bank of Nova Scotia chief executive Rick Waugh also said he believes the liquidity injections are a positive sign.
“Look what's happening — huge, billions of dollars of sophisticated money finding a home. Good news,” he said at the conference.
The comments come one day after CIBC announced that it is raising $2.75-billion by selling discounted shares to investors as it grapples with a total of more than $3-billion in writedowns related to its exposure to the U.S. subprime mortgage market.
On Tuesday morning, the bank's shares were trading down more than 3 per cent, at $69.86 on the Toronto Stock Exchange.
In a note to clients, Credit Suisse analyst Jim Bantis said that the “capital injection should significantly reduce the uncertainty surrounding CIBC's financial position, [but] we remain concerned that the core operating franchise remains under siege by its competitors.”
Mr. Nixon said that, globally, opportunities have been created by the market turmoil that's hampering many banks.
“We are seeing business that we might not have seen before,” he said.
But Canada's biggest bank isn't salivating over acquisition opportunities, despite the fact that banks are cheaper.
“We do have an environment where unexpected opportunities may present themselves, and we're in a position to take advantage of those, but we're not going to chase transactions for the sake of doing deals simply because values have come down,” Mr. Nixon said. Outside of Canada, he suggested that wealth management deals would be more attractive to RBC right now than buying banks would be. Both would be priorities over any capital markets, or investment banking, opportunities.
But Royal Bank remains committed to its capital markets business, which accounts very roughly for one-quarter of its earnings, Mr. Nixon said.
Investment banking earnings growth will likely slow from recent levels. RBC will be seeking most of its growth this year from consumer banking and wealth management.
But Mr. Nixon said he doesn't expect “doom and gloom” in the capital markets business for the next few years.
“It will shift around, but we certainly aren't expecting it to fall off the cliff,” he said. “And we do think there will be an opportunity simply because of other people exiting certain businesses.”
Mr. Nixon said the financial system and markets are already starting to feel better, and that the liquidity that's been pumped into the system is having an impact. However, the “real world” is not necessarily feeling better, he said.
He believes that what happens in the real world, with respect to economic growth, will be “the real story for 2008.”
His colleague Charles Winograd, head of RBC Capital Markets, said 2008 will be simpler than the past year.
“To quote the rhetoric of an election campaign long ago, it will be the economy stupid,” he said, adding that it will be Main Street, not Wall Street, that's key.
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Reuters, 11 January 2008
Investors looking for future Canadian bank-stock outperformers should consider the winners of the past decade, which include Royal Bank of Canada and Bank of Nova Scotia , an analyst says.
Ten years ago this month, the first of two big Canadian bank-merger proposals was unveiled.
The two planned unions -- Royal Bank with Bank of Montreal , and Canadian Imperial Bank of Commerce with Toronto-Dominion Bank -- gave rise to much political debate and were ultimately killed in late 1998 by the Liberal government of the day.
Since then, half of the Big Six Canadian banks have been able to "get on with life" without mergers by using different strategies, while the other half delivered relatively poor performance, Credit Suisse bank analyst Jim Bantis said in a research report this week.
The three in the latter category -- National Bank of Canada , Bank of Montreal and Canadian Imperial Bank of Commerce -- don't appear poised to break out of the pack, Bantis said.
"Despite more compelling valuations, near term we are unconvinced that the lower tier performers of the past decade are positioned to outperform due to respective off-balance sheet issues and lagging domestic retail franchises," Bantis wrote.
Royal, the country's largest bank, took first place in his scorecard of decade-long performance.
The ranking was based on 10 measures, including growth in share price, dividends and return on equity, and levels of non-recurring charges, acquisition spending and branch expansion.
Toronto-Dominion and Scotiabank tied for second place, followed by National Bank, BMO and finally CIBC.
CIBC's last-place finish comes partly from above-average charges connected to failed energy trader Enron, and to relatively slow growth in assets and market capitalization over the past decade. CIBC's market value grew by only 28 percent in that period, Bantis said.
In his view, Royal and Scotiabank are best positioned to emerge "relatively unscathed" from the ongoing credit crisis. Both have made numerous acquisitions outside Canada in recent years, but the pair have avoided anything too large or too risky, Bantis noted.
"Royal Bank achieved its leading performance by investing in and improving its leading domestic retail franchise," Bantis said.
TD Bank has also created a highly profitable domestic retail bank, but Bantis cited some "trepidation" because of its strategic gamble on the U.S. retail banking market.
TD is in the process of acquiring New Jersey-based Commerce Bancorp in a cash and stock deal that was valued at about $8.5 billion last autumn, but is now worth about $7.8 billion at TD's recent share price.
And last year, TD spent $3.2 billion to acquire the remaining stake in New England-focused TD Banknorth that it did not already own.
Three Canadian banks -- Royal, TD and Scotiabank -- were among the top 10 in North America by market capitalization in 2007, up from just one Canadian bank in 1997, according to Credit Suisse.
"We have witnessed stunning growth by the Canadian banks during the past decade," Bantis wrote.
But even so, Royal's market cap is less than half that of the third-largest U.S. player, JPMorgan Chase , he noted.
The Canadian Bankers Association made a similar point this week to a federal competition-policy review panel. The industry association said that while the Canadian sector is expanding, U.S. and European competitors have ballooned in size due to mergers and acquisitions. The CBA wants Canadian banks to be able to do the same.
;
Investors looking for future Canadian bank-stock outperformers should consider the winners of the past decade, which include Royal Bank of Canada and Bank of Nova Scotia , an analyst says.
Ten years ago this month, the first of two big Canadian bank-merger proposals was unveiled.
The two planned unions -- Royal Bank with Bank of Montreal , and Canadian Imperial Bank of Commerce with Toronto-Dominion Bank -- gave rise to much political debate and were ultimately killed in late 1998 by the Liberal government of the day.
Since then, half of the Big Six Canadian banks have been able to "get on with life" without mergers by using different strategies, while the other half delivered relatively poor performance, Credit Suisse bank analyst Jim Bantis said in a research report this week.
The three in the latter category -- National Bank of Canada , Bank of Montreal and Canadian Imperial Bank of Commerce -- don't appear poised to break out of the pack, Bantis said.
"Despite more compelling valuations, near term we are unconvinced that the lower tier performers of the past decade are positioned to outperform due to respective off-balance sheet issues and lagging domestic retail franchises," Bantis wrote.
Royal, the country's largest bank, took first place in his scorecard of decade-long performance.
The ranking was based on 10 measures, including growth in share price, dividends and return on equity, and levels of non-recurring charges, acquisition spending and branch expansion.
Toronto-Dominion and Scotiabank tied for second place, followed by National Bank, BMO and finally CIBC.
CIBC's last-place finish comes partly from above-average charges connected to failed energy trader Enron, and to relatively slow growth in assets and market capitalization over the past decade. CIBC's market value grew by only 28 percent in that period, Bantis said.
In his view, Royal and Scotiabank are best positioned to emerge "relatively unscathed" from the ongoing credit crisis. Both have made numerous acquisitions outside Canada in recent years, but the pair have avoided anything too large or too risky, Bantis noted.
"Royal Bank achieved its leading performance by investing in and improving its leading domestic retail franchise," Bantis said.
TD Bank has also created a highly profitable domestic retail bank, but Bantis cited some "trepidation" because of its strategic gamble on the U.S. retail banking market.
TD is in the process of acquiring New Jersey-based Commerce Bancorp in a cash and stock deal that was valued at about $8.5 billion last autumn, but is now worth about $7.8 billion at TD's recent share price.
And last year, TD spent $3.2 billion to acquire the remaining stake in New England-focused TD Banknorth that it did not already own.
Three Canadian banks -- Royal, TD and Scotiabank -- were among the top 10 in North America by market capitalization in 2007, up from just one Canadian bank in 1997, according to Credit Suisse.
"We have witnessed stunning growth by the Canadian banks during the past decade," Bantis wrote.
But even so, Royal's market cap is less than half that of the third-largest U.S. player, JPMorgan Chase , he noted.
The Canadian Bankers Association made a similar point this week to a federal competition-policy review panel. The industry association said that while the Canadian sector is expanding, U.S. and European competitors have ballooned in size due to mergers and acquisitions. The CBA wants Canadian banks to be able to do the same.
